When Wisconsin became a state in 1848, the lands between the St. Croix and Mississippi Rivers were without an organized government. On August 26, 1848, a gathering was held at John McKusick's store in Stillwater MN. This "Stillwater Convention" elected Henry Sibley to represent them in Congress with the primary goal being the establishment of the Minnesota Territory.

Sibley faced a significant hurdle. Southerners were already balking at allowing northern areas, considered likely to oppose slavery, to organize. The population threshold was 5,000 for an unorganized territory to petition to become a formal territory. Minnesota's population was about 4,500 in 1848. Only a small area - from the Mississippi to the St Croix Rivers, north to Mille Lacs - had been ceded from the Indians. In December of 1848, Sibley made his case in a speech to the Committee on Elections in the House of Representatives. Still, with the strong support and assistance of Senator Stephen Douglas of Illinois, it took less than six months for Sibley to achieve his goal: The Minnesota Territory was created by the Organic Act of 1849 in March of that year.

When the territory was organized, about a third of the population lived in and around Pembina in what would become northwestern Minnesota/northeastern North Dakota. Joseph Rolette, Jr. represented the interests of this population center in the territorial legislature. Fur traders there had, for generations, married into the local tribes. Those who lived a "European lifestyle" were considered white; those who followed traditional Indian culture were considered Indian. When it came time to vote, the only real requirement was that those appearing to cast a ballot be dressed in European garb. It was wryly observed that a single pair of breeches was well used on Election Day; an Indian pulled on the trousers, voted, and, after casting his vote and returning home, removed the trousers and handed them off to the next voter. The significant racial divide in Minnesota was between Indian and non-Indian. A black fur trader near Leech Lake would often say that he and his European partner were the first white settlers in that area of Minnesota. There was a brisk trade between St. Paul and the Pembina settlements by way of ox cart.

There were three other significant settlements when the territory was established, and each was designated the home of an important institution.

St. Paul was named the territorial capital.

The 1851 charter for the preparatory school that would become the University of Minnesota stipulated that the institution be located at St. Anthony (Minneapolis).

Stillwater became the site of the territorial prison. It was built in 1851 in "Battle Hollow," a ravine that had been the site of a battle between the Sioux and Ojibwa Indians in 1839. The prison operated from 1853 until 1914. Its most famous residents were Cole, Bob, and Jim Younger, who were imprisoned there after the notorious 1876 bank robbery in Northfield. This historic building was destroyed by arson in 2002.

In 1851, Alexander Ramsey led a commission that negotiated two treaties with 4 bands of Dakota Sioux that ceded all of their land west of the Mississippi to the US Government. Once again, southern members of Congress did everything they could to sabotage the treaties. Believing that the Indians would reject the treaty because of the change, they removed the article guaranteeing the Sioux the land on either side of the Minnesota River from its source to the Yellow Medicine River. The Indians were not happy with the change, but after assurances that these lands would still be reserved for the Indians, they reluctantly agreed. This allowed the government to issue land grants and patents, and stimulated settlement throughout the southern portions of the territory.

This painting of the 1851 treaty signing at Traverse de Sioux by Francis Millet

As soon as the treaty's approval was announced in late 1852, the populations of towns along the Mississippi from Red Wing to Winona began to swell. Farmers took up land with the understanding that they would file their claims as soon as the bureaucracy was ready to handle the paperwork. By 1854 30,000 European-Americans lived in Minnesota Territory and in 1857 that number had mushroomed to over 150,000.

In 1849, James Goodhue began publishing the Minnesota Pioneer in St. Paul. It was the first newspaper in the territory, and continues today as the St Paul Pioneer Press.

Methodist bishop Leonidus Hamline opened a co-educational college in Red Wing, Minnesota in 1854. Although the precursor to the University of Minnesota was chartered in 1851, it did not accept students until 1857. Hamline University would eventually relocate from Red Wing to St. Paul, and it has a legitimate claim to being the first institution of higher learning in the Minnesota Territory.

The first railroad to reach the Mississippi was the Rock Island Line in Illinois. To celebrate this achievement, the railroad sponsored a "celebrity" excursion in 1854. After traveling by rail to the railhead on the banks of the Mississippi, five steamboats brought former president Millard Fillmore and 1200 other persons of note up the mighty river to St. Paul. A whirlwind tour that included the Falls of St. Anthony, Minnehaha Falls, and Fort Snelling was followed by a reception at the capitol hosted by the governor. As reports of the beautiful scenery all along the upper Mississippi spread across the East, Minnesota became a tourist attraction. In 1856, 56,000 tourists visited St Paul on the steamboats.

In 1855, the first bridge across the Mississippi (anywhere on the river) was built between Minneapolis and St. Anthony. Gas lights were installed along the streets of St Paul in 1858.

John Emerson brought his slaves along when he was posted to Fort Snelling in the 1850's. After Emerson's death in Missouri, Dred Scott and his wife claimed that they were free American citizens because they had spent most of their lives in federal territory. In 1857, the Supreme Court ruled in the Dred Scott case that slavery was a state's rights issue. The federal government could not outlaw slavery in its territories and, going a step further, ruled that no African-American could claim American citizenship, even in a free state. This landmark decision inflamed the abolitionists and brought the country closer to Civil War.

Minnesota became a state on May 11, 1858. In a time before telephones, or even telegraph, the news reached the state by riverboat. Henry Sibley was the State of Minnesota's first governor, and it was represented in Washington by Senators Henry M. Rice and James Shields, and Representatives James Cavanaugh and William Wallace Phelps. The western part of the territory remained unorganized until 1861, when it became part of Dakota Territory.